CBAM Benchmarks: Why the EU ETS Benchmarks Will Determine Your CBAM Costs

The Role of Benchmarks

In the European Emissions Trading System, benchmarks have always played a central role. They determine how many free allowances emission-intensive installations receive and create incentives for emission reductions. Through this free allocation, the aim was to prevent the threat of industry relocation and the associated emissions. With the transition of the Carbon Border Adjustment Mechanism into its regular phase as of 2026, this previous mechanism of free allocation will be replaced, and benchmarks will now also become decisive for calculating the CO₂ costs of imports into the European Union.

Benchmarks as the Basis for the Deduction

From 2026 onwards, importing companies must surrender CBAM certificates corresponding to the embedded emissions of the imported goods. However, part of these emissions can be deducted based on benchmarks. These benchmarks are aligned with the product-specific ETS benchmarks and reflect the average emissions of the most efficient EU producers. The calculation follows a clear formula. The emission-relevant amount for which certificates must be purchased is the reported emissions minus the benchmark-based deduction, multiplied by the so-called CBAM factor: CBAM Certificates = embedded emissions – (Benchmark × CBAM Factor) An example: A product shows embedded emissions of ten tonnes of CO₂ per tonne. The benchmark is six tonnes. With a CBAM factor of 0.975, the result is: 10 – (6 × 0.975) = 10 – 5.85 = 4.15 tonnes of CO₂ The company must purchase a corresponding number of CBAM certificates.

The Declining CBAM Factor

The CBAM factor will be gradually reduced over the years. In 2026 it will be 0.975, in 2028 it will fall to 0.90, in 2030 to 0.515. From 2034 onwards, the deduction will be completely eliminated. Certificates will then have to be purchased for the entire embedded emissions. This phased transition corresponds to the political goal of treating European producers and importers equally. As the CBAM factor also reduces free allocation in the ETS, the deduction in CBAM will decrease in parallel. It will therefore become more expensive for both EU producers and importers in equal measure.

No Final Benchmark Values Yet

Despite their enormous importance, it has not yet been determined which CBAM benchmark values will apply from 2026. The European Commission is currently conducting consultations to develop the methodology for the CBAM benchmarks and align them with ETS rules. Without this information, companies currently have little ability to make reliable cost forecasts. This creates significant uncertainty, particularly for emission-intensive sectors such as steel, aluminium, or fertilizers. The lack of transparency complicates strategic purchasing decisions and forward-looking planning. Why CBAM Benchmarks Are Not Yet Available The reason for the delay lies in the European Emissions Trading System. CBAM benchmarks will be derived from the revised EU ETS benchmarks for the years 2026 to 2030, which are also not yet available. According to the Commission, the final ETS values will not be published until early 2026 at the earliest. The ETS benchmarks are primarily used to manage the free allocation of allowances to European industrial installations. They are based on historical production data and the emission performance of the most efficient market participants. In the upcoming phase, they will be revised taking into account ambitious reduction targets, technological progress, and stricter data collection standards.

CBAM Benchmarks vs. ETS Benchmarks

For CBAM, the role of benchmarks is similar, but not identical. While ETS benchmarks are installation-based and focused on internal EU processes, CBAM benchmarks must be product-based and globally applicable. They are intended to reflect the average emission intensity of an efficient EU producer, which then serves as a reference point for imports. This methodological adjustment is necessary because CBAM is a trade-related mechanism and must ensure equal treatment of domestic industry and importers.

Outlook

Benchmarks are not just a technical detail, but the core of future CO₂ pricing at the EU’s external borders. They will determine how heavily imports are burdened – and whether investments in low-emission supply chains will pay off. Those who create transparency early on and align their processes accordingly will benefit from long-term planning security and lower CBAM costs. The coming phase demands strategic thinking and a pragmatic approach to benchmarks. If you need support with CBAM cost calculation or with strategic alignment to the new benchmark rules, feel free to contact us directly: helge@kolum.earth.